{"id":10133,"date":"2024-01-12T15:50:38","date_gmt":"2024-01-12T22:50:38","guid":{"rendered":"https:\/\/mattfife.com\/?p=10133"},"modified":"2024-01-16T12:46:48","modified_gmt":"2024-01-16T19:46:48","slug":"avoid-crazy-at-all-costs","status":"publish","type":"post","link":"https:\/\/mattfife.com\/?p=10133","title":{"rendered":"“Avoid crazy at all costs”"},"content":{"rendered":"\n

Charlie Munger was vice chairman of Berkshire-Hathaway and worked for almost 45 years with Warren Buffett. Munger died at 99 in December. I found his advice good for investing and life in general.<\/p>\n\n\n\n

When asked if there was a secret to investing, he said, \u201cI don\u2019t know the secret.\u201d Munger then added that he\u2019d avoided major catastrophes in his life because he was \u201cso cautious,\u201d always avoiding obvious risks in his personal life and career.<\/p>\n\n\n\n

\u201cCrazy is way more common than you think,\u201d said Munger. \u201cIt\u2019s easy to slip into crazy. Just avoid it, avoid it, avoid it.\u201d <\/p>\n\n\n\n

What does Munger think is crazy? In 2018, Warren Buffett said<\/a>, \u201cMy partner Charlie says there is only three ways a smart person can go broke: liquor, ladies and leverage.\u201d<\/p>\n\n\n\n

Munger clarified his general stance on personal vices: If it can \u201ctake that many fine people into deep trouble,\u201d stay away from it. That included smoking and drinking to the point of alcoholism, he said \u2014 noting a prevalence of alcoholics and \u201cnear alcoholics\u201d in his own family.<\/p>\n\n\n\n

By leverage, he referred to the strategy of borrowing money to invest in stocks or buy another business. Munger said Berkshire Hathaway could \u201ceasily be worth twice what it is now\u201d if the pair had used more leverage and risky strategies rather than simply reinvesting its past earnings.<\/p>\n\n\n\n

Buffet said they (Buffet\/Munger) could absorb significant losses, but Berkshire\u2019s smaller shareholders could not. They intentionally decided to protect their cohorts by running Berkshire in a \u201cvery cautious\u201d fashion, favoring long-term investments over short-term gambles.<\/p>\n\n\n\n

Big Fancy Homes are almost always a bad idea<\/h2>\n\n\n\n

Besides ‘avoiding crazy’, Munger often preached the merits of living modestly,\u00a0he gave advice like\u00a0\u201cdon\u2019t have a lot of envy\u201d and \u201cdon\u2019t overspend your income.\u201d He credited his success and longevity to a long-held sense of caution and an ability \u201cto avoid all standard ways of failing.\u201d<\/p>\n\n\n\n

Another area was the fact both he and Warren Buffet lived in the same house for almost 70 years.<\/p>\n\n\n\n

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[Buffett and I] are both smart enough to have watched our friends who got rich build these really fancy houses, and I would say in practically every case, they make the person less happy, not happier. <\/p>\n<\/blockquote>\n\n\n\n

A \u201cbasic house\u201d has utility, said Munger, noting that a larger home could help you entertain more people \u2014 but that\u2019s about it. \u201cIt\u2019s a very expensive thing to do, and it doesn\u2019t do you that much good.\u201d He also purposefully avoided a gaudy lifestyle that might create spoiled children.<\/p>\n\n\n\n

They also weren’t fans of multiple homes. At the 2014 Berkshire Hathaway shareholder meeting, Buffett reportedly said his quality of life would \u201cbe worse if [he] had six or eight houses\u201d.<\/p>\n\n\n\n

Articles:<\/p>\n\n\n\n